Forex Trading Terms: Cross Currency

September 16, 2008 by Trader Rich

What is a cross currency in FX trading?One of the forex trading terms you may run across is "cross currency." Sometimes, a cross currency in FX trading is referred to as "crosses." In any case, this represents a forex trading currency pair that does not include the U.S. dollar.

Origin of the cross currency

When the FX market initially started, there were no crosses. Instead, every transaction had to include the U.S. dollar. If you wanted to trade sterling for yen, you first had to turn sterling into dollar and then dollar into yen.

When the FX market became larger, and other currencies became stronger, it became necessary to allow direct trades that did not include the U.S. dollar. These are known as cross currency trades, or crosses.